Richard Green is a professor in the Sol Price School of Public Policy and the Marshall School of Business at the University of Southern California.
This blog will feature commentary on the current state of housing, commercial real estate, mortgage finance, and urban development around the world. It may also at times have ruminations about graduate business education.

Monday, September 17, 2018

I'm doing some work on reverse mortgages. One of the issues confronting the analysis of reverse mortgages is long-term house price volatility. While house prices can be quite volatile from year to year, this doesn't necessarily mean they are volatile for long-term holding periods.

Below are computations of 10 year, annualized, house price growth rates, standard deviations, minima, maxima, and coefficients of variation for the 100 largest US MSAs. The data are the Federal Housing Finance Administration Purchase Only Index Data, and the computations are based on data from the first quarter of 1991 through the second quarter of 2018 (which means we have ten year hold data for 17+ years). All data are nominal prices.

Note that in all cities, the average ten year growth rate is nominally positive. The average across cities is 3.4 percent, with a range from .8 percent (Detroit) to 6 percent (San Francisco). Neither of these should be surprising.

More interesting (to me, anyway) are the 42 cities that never had a negative house price period over a ten year hold. Texas has a number of them (San Antonio has the maximum, minimum house price growth rate over ten years), and Pittsburgh and Oklahoma City are very steady too. But a surprise to me are San Francisco and San Jose--markets that have has large short term drops in house prices. In these markets, if one waited ten years, one never saw a house price drop over the holding period (again, we're talking in nominal terms here). There have, however, been ten year periods in LA where nominal house price dropped by a shade under one percent per year.

Tuesday, May 08, 2018

It’s abundantly clear that in today’s economy, the ability to attract and mobilize highly educated people—so-called human capital—is the key factor in the the wealth of nations as well of that of cities. But the driving force of talent in economic growth also contributes to our worsening divides. While metropolitan areas with more educated people have higher levels of income, they also have higher housing costs. And the burden of those costs falls hardest on the less educated.A working paper by urban economist Richard Green, of the University of Southern California, and Jung Choi, of the Urban Institute takes, a deep dive into this conundrum....

Monday, May 07, 2018

(1) Tax cuts do not magically create growth; (2) Vaccines are among the best things we have ever invented; (3) raising the minimum wage to a point improves living standards for low wage workers (and that point may be somewhere between $11 and $15 per hour), beyond that point, it lowers living standards for low wage workers; (4) GMOs are fine; (5) the benefits of the Clean Air Act swamp the costs by an order of magnitude or more; (6) the mortgage interest deduction has a vanishingly small impact on the homeownership rate; (7) trade has raised living standards for hundreds of millions around the world; (8) trade has reduced living standards for low skilled workers in the US; (9) rent control reduces the stock of rental housing; (10) even though I like Lebron better than Jordan, MJ was the better player.

Sunday, April 15, 2018

Rent stabilization is a transfer from those who own rent stabilized units to those who live in such units. As such, it is not a specific redistribution from high income households to low income households, but rather a random distribution from owners of various income levels (who can range from middle-class owners of one unit to large holders of private equity or REITS) to renters of various income levels.

I know of no good way to recover the incomes of property owners, but we can get a flavor of the distribution of income among beneficiaries of rent stabilized properties in Los Angeles, by looking at the income distribution of those who live in properties built just before rent stabilization and just after. We can't exactly nail it, because rent stabilization in LA went into effect into effect in October 1978, and the census tells us the decade in when properties were being built. Still, comparing the incomes of renters living in buildings built in the 1970s with those of the 1980s can tell us something about how well targeted rent stabilization is.

I downloaded American Community Survey data from IPUMS USA. (See Steven Ruggles, Katie Genadek, Ronald Goeken, Josiah Grover, and Matthew Sobek. Integrated Public Use Microdata Series: Version 7.0 [dataset]. Minneapolis, MN: University of Minnesota, 2017. https://doi.org/10.18128/D010.V7.0). I looked at the city of Los Angeles, and stripped out single family detached houses, and, of course, owner houses. I used the ACS Household Weights. Here are the income distributions I found for properties built in the 1970s and 1980s.

Note that the median income of those in (largely) rent stabilized units is higher than those in units that are not stabilized. Also note that the incomes at the 75th percentile are nearly the same. At the 90th percentile, people in 1970s vintage properties have a lower income than those in 1980s properties, but their income is still rather high (i.e., it is a reasonable question to ask whether households who make $114,000 a year or more should be receiving a housing subsidy).

Taxing people of means (which we can identify) to provide housing subsidies to those without is good policy. It is the correct way to help those whose income is insufficient to pay for adequate housing.

(p.s., whenever I post something like this, I welcome any and all attempts to reproduce it. I makes mistakes!).